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Drug plan hit with backlash

The Obama administration’s aggressive move to rein in the cost of prescription drugs in Medicare has triggered a backlash, with some advocates warning the plan goes too far.

The administration is pursuing a pilot program that could squeeze the margins for doctors that prescribe high-cost drugs, potentially saving the government billions of dollars in the process.

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It’s the first step of a model from the Centers for Medicare and Medicaid Services (CMS) that could be finalized as early as next month. The stark shift in doctor payments is slated to go into effect in some parts of the country this summer.

But the proposal is facing mounting opposition from groups that represent people with some of the costliest conditions to treat, including cancer, multiple sclerosis and rheumatoid arthritis.

“I think they are shocked by the pushback,” said the head of one advocacy group that recently met with the CMS. “They didn’t anticipate what was going to happen and now they are really backing up now going, ‘What do we do about this?’ ”

The Obama administration has defended the plan, calling it a serious attempt to deal with a decades-old problem. The current payment structure, the administration says, has resulted in doctors prescribing higher-priced drugs when cheaper, effective alternatives are available.

“The goal is to test whether alternative approaches will lead to better value,” Dr. Patrick Conway, chief medical officer at the CMS, told reporters when he announced the model last month.

The first phase of the administration’s plan is to rethink doctor payments, starting as early as this summer. The second phase, expected in 2017, will dole out doctor payments for certain drugs based on how effective those drugs have proven to be.

If the pilot model is shown to work after five years, it could be incorporated on a national basis.

But groups like the Biotechnology Innovation Organization and the American College of Rheumatology say the new payment formula has the potential to force smaller, rural healthcare providers out of business.

Dr. William Harvey, head of government relations for the American College of Rheumatology, said he has observed a “huge backlash” in large part because many doctor and patient groups felt they had been blindsided by the proposed shift.

“Everyone says, ‘No, no, no, this has to be repealed, we can’t have this at all,’ ” Harvey said, adding much of the chaos could have been avoided if CMS officials “would have had conversations with us.”

At least one group has met face-to-face with Medicare agency officials, and others say they have tried, though administration officials say their doors have been open throughout the process.

Conway, a practicing physician at the CMS, addressed the criticism during a Pew Charitable Trusts panel on the Medicare Part B proposal on Monday.

“We thought we expressed this well in the proposal, but we’ve heard from some patient groups, so I want to say this clearly: We hear you, and we will deeply engage patient and consumer communities in this model,” Conway said.

He stressed the agency had “received input prior to this proposal” and will have “the most public and engaged process that we can.”

Physicians are now reimbursed by Medicare based on the “average sales price” of a drug plus an additional 6 percent to cover storage and other expenses.

Officials at the CMS want to cut that formula to the average-sales price plus 2.5 percent, with an additional flat fee of about $16.

While the government says the 6 percent formula encourages the use of pricey drugs, Medicare doctors say they’re insulted by the implication that they’re prescribing medicine based on the costs.

The cost of Medicare Part B drugs has jumped by an average of 8.6 percent annually since 2007, and the total amount spent on drugs has doubled in the last five years. Those costs are expected to climb even higher as costlier drugs come to the market.

Most medical experts agree the Medicare’s reimbursement system is flawed. But critics of the CMS pilot program argue the administration is meddling in a system that’s more complex than just “average sales price.”

“It needs to be more comprehensive than just looking at the drug costs,” Stephen Grubbs, vice president of clinical affairs for the American Society of Clinical Oncology, said at a panel Monday.

Some healthcare observers have described the pilot as a “half-step” toward giving Medicare more control over drug pricing, a longtime goal of Democrats and patient advocacy groups.

Powerful groups like the AARP and the Center for American Progress have backed the administration’s attempts to alter the status quo of Medicare reimbursement.

“Frankly, we’re really glad to see it. It’s something we think has been a long time coming,” said KJ Hertz, a senior legislative representative at the AARP.

Some critics of the proposal, like Harvey, said the potential longer-term effect of making Medicare more sustainable is one reason some of the bigger healthcare groups have showed a “hesitancy to speak so vociferously” against the experiment.

Even big-name cancer groups, like the American Cancer Society, have not yet released public comments about the proposal. A representative for the group declined to comment for this story.

The backlash against the proposal began before its public release. A draft of the proposal had been leaked weeks earlier, and some of the concerned groups said officials had assured them that it was not final version.

But when it was released, some close observers said the final copy strongly resembled that draft.

The policy was officially released in mid-March, sending shockwaves across doctor and patient groups.

A day after it was released, CMS acting Administrator Andy Slavitt came face-to-face with drug executives at the annual policy conference of the Pharmaceutical Research and Manufacturers of America (PhRMA).

Seated before 100 drugmakers, PhRMA board member and Merck CEO Kenneth Frazier asked Slavitt about “the elephant in the room.”

“As you can imagine, people have a great deal of concern about the proposal,” Frazier said.

Slavitt pitched the idea as a way to increase access to life-saving medicine.

“There is nothing that we propose to do, or should do, in any way, that prevents a patient from getting a prescription medicine that they need,” Slavitt told the drugmakers.